Why Jardine is unlikely to pull the plug

COMMENT: "It is quite something when one of the once great names of British industry becomes nothing more than a penny stock punt for he spivvier end of the stock market"

It is quite something when Trafalgar House, once one of the great names of British industry, becomes nothing more than a penny stock punt for the spivvier end of the stock market. But yesterday's price gyrations in another session of extremely heavy volume confirmed that to be the case.

It is no surprise that cocktail party gossip in the colony's dying days is all about the Keswicks' latest disaster, the collapse of Jardine Matheson's escape tunnel from the Chinese authorities that the so-called Noble House has always failed to appease. There are few places where loss of face stings so harshly.

What is most remarkable is the way that, so far, Henry and Simon Keswick have survived the loss to Jardine's shareholders of so much of their investment in Trafs. Maybe the bargain hunters that swept the shares off their lows yesterday are right to gamble that the brothers would never dare to crystallise the loss of the pounds 300m they have poured in to the sinking conglomerate since 1992. In the context of a giant trading empire such as Jardine, pounds 300m may not be life-threatening but it is the sort of fouled-up investment that would rightly be the end of many a chief executive

Clinging on and hoping for the best is unlikely to be a realistic option for Hongkong Land, the subsidiary through which Jardine took the ill- conceived stake. If Trafs is to survive its current deep-seated problems it must pare down to its contracting and engineering core, selling off Cunard and Ideal, the housebuilder, and inject enough new cash to convince customers the company has a viable future. Jardine must risk throwing good money after bad.

If Trafs were a manufacturing business, the strength of its product might be enough to pull it through. But in engineering and contracting, confidence is all - customers will simply not consider placing orders with a company under a cloud as large and dark as that hanging over Trafalgar.

The other reason Jardine will probably avoid pulling the plug is the doubt doing so would cast on the company's whole strategy. It has got things wrong before, investing in UK property just before the 1970s collapse, for example, but with the imminent arrival of the Chinese in Hong Kong the stakes are immeasurably higher this time round. Not that Hongkong Land's continued support necessarily makes Trafs' battered shares any more attractive. Only when the full extent of the damage to the company's balance sheet is revealed in December will anything but the utmost caution be appropriate.

Thorn music sweeter than CBI presidency

The Confederation of British Industry is still an important and influential organisation but Sir Colin Southgate, chairman of Thorn EMI, can hardly be blamed for turning down its presidency. Over the next year or two, he is going to have his work more than cut out. Thorn EMI may not yet be in play, but it is pretty close to it. If Sir Colin decides to push ahead with plans to demerge the company's music and TV rental businesses, then it certainly will be. The music side, with its galaxy of stars and copyright, is one of the three biggest record labels in the world and the only one that it is even remotely possible to buy. As the multi-media revolution gathers pace, it becomes increasingly attractive.

Plainly it makes strategic sense to demerge the TV rental business, which is about as relevant to music as a ten-bob note. From a shareholder value point of view, it also makes commercial sense. TV rental and music as separately quoted companies would almost certainly be worth more than the two companies combined. But from the point of view of keeping the core music business independent and British - which Sir Colin is keen to do - it may make no sense at all. Once stripped of TV rental, the music side becomes even more easy to purchase. There's the conundrum.

And if the purpose of all this is only one of maximising shareholder value, there may be better ways of doing it. One method would be to put the music side up for sale (likely price pounds 5bn plus) and make it subject to a trade auction. Certainly Thorn EMI has already had approaches along these lines. The proceeds could then be handed back to shareholders by way of special dividend, allowing gross funds to claim a thumping great tax credit on top.

There is, however, one way in which the trick of both demerging and remaining independent might be accomplished. This would be to accompany the demerger with the acquisition by the music side of a more appropriate business - say in publishing. If that is what Sir Colin has in mind, it is no wonder he hasn't got time for the CBI.

Clarke wrestles with housing conundrum

Kenneth Clarke today meets with his Treasury team at the country getaway of Dorneywood with fresh calls for action to help the housing market ringing in his ears.

At first blush, the latest dispatch from the battlefront of Arcadia Avenue could hardly be gloomier. Cornerstone, the rump of what was once the country's largest privately owned estate agency chain, went bust yesterday. Meanwhile, building societies said that their net lending had fallen by one-fifth in September. Banks also reported a decline in their mortgage lending - this in the last month before the new mortgage insurance provisions came into effect.

All powerful ammunition for the societies in their lobbying for help in the Budget. The favoured tax break is now the removal of stamp duty, which at around pounds 500m on residential property would at at least have the merit of not costing an arm and a leg. But even if the Chancellor were not in the tight fiscal corner that he finds himself, he might think twice before granting the building societies their wish. There are signs that the housing market may already be recovering from this year's renewed slump.

Earlier this month, the Bank of England published figures showing a big jump in the number of loans approved in August by banks and building societies. In fact they reached their highest level so far this year. We now know that building societies increased their loan approvals in September, too.

Not all loan approvals translate into actual purchases, but they at least indicate whether people are seriously looking for houses. In a few days' time we'll know whether banks also stepped up their loan approvals in September. If this is so, it would show that August was not just a freak month and that the housing market might be poised for revival.

With so little money to spare, Kenneth Clarke is likely to cross his fingers and hope that the housing market is set to recover of its own accord. If he gets it wrong, he won't be the first Chancellor to be misled by the green shoots of recovery.

PROMOTED VIDEO
Extras
indybest
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
News
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed